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Jul 2, 2015 10:41:00 AM

Are we at the inflection point of “free"?

As we reflect on our independence and freedom this week in the US, we thought it would be interesting to spend some time thinking about the concept of “Free” on the internet. As the advertising, ad tech and publishing industries consider the future of the ad-sponsored model in their daily machinations, we would all do well to ponder the consequences of “free” going away.

Today there are many threats to “free” (the idea that content or apps are provided free of charge if the user is exposed to paid messages from advertisers):

Publishers are left with a world where the outlook is bleak when it comes to long-term sustainability with the status-quo business model.

For the sake of exploration, let’s fast forward to a draconian outcome where “free” has been so threatened that only the largest players can survive...

  • The publisher landscape 5 years from now could look like this: We have a dozen or so consolidated healthy premium publishers or publisher co-ops large enough to be independent of the new Digital Networks: Google, Facebook and VerizAol (think NBC, ABC, CBS in the TV days before cable). The mid and long tail pubs are either struggling to stay afloat or all insta-posting to Facebook, ChatApps or Google owned feeds.

  • The advertiser landscape could look like this: Brands and agencies work with Google, Facebook, VerizAol or one of these large publishers or co-ops. Obviously, pricing for good inventory is at a significant premium given the reduction in competition. Its also likely that the quality of inventory will improve from these “majors” given the control they will have to enforce viewability and anti-fraud measures—forcing further upward pricing pressure for buyers.

  • The Ad tech landscape could look like this: Ad tech companies that lack the scale of the Digital Networks—  are mostly out of business due to their own lack of scale and differentiation. Those that did muddle through have been swallowed up by one of the big three Digital Networks or the marketing software firms seeking to build out end-to-end marketing clouds.

While this scenario does ignore some simple things like human ingenuity, pure darwinism and some rather obvious market forces, it does call out the need for the principal three operators in our industry to do some thinking about how to secure the health of the ad-sponsored model for years to come.

So what can we all do?:

  • Publishers: Get smart about data-driven digital media selling by understanding the value of your inventory. Get back in control of your pricing and inventory. Take command of your publisher trading data --the data about your selling — so you can optimize digital media ad pricing and build long-term programmatic deals with buyers seeking your quality inventory.The data and tools are available to you to take control of programmatic yield management. You need to own your destiny rather than blaming mediocre results on the buy side. Tools exist today for RTB yield management and programmatic deal management. Demand transparency. If the buy side wants access to your great inventory via programmatic, demand symmetrical information.

  • Buyers & Agencies: If you want to have access to a lot of choice and competition in supply (and more competitive pricing), start working with your trustworthy suppliers. Commerce is not a zero sum game. Share data so publishers can serve you better and make sure you are getting the ROI you need to continue investing. If you continue to seek to buy anonymously or push for asymmetrical information, the sell side will suffer, you’ll have less partners to buy from and your costs to reach audiences at scale will end up increasing.

  • Ad tech firms:  Enough with the margin-eroding “hops” that some are adding to the sale of an impression to an end buyer. Build value, not waste. Get rid of the business models that erode seller margin. If you aren’t part of the solution, you are part of the problem. Bring all your brilliance to bear on the big problem independent buyers and sellers face — don’t just go for the quick buck. For the market to remain healthy for years to come, all independent parties need to focus on balance and protecting the industry with productive innovation. Larger players are removing waste from the supply chain and improving quality...independants need to do the same.

Aside from the obvious desire all these mentioned operators have to protect today’s ad-sponsored model, we should also consider the most draconian outcome. One that threatens to our liberty and way of life. Should publishers, advertisers and tech firms fail to respond to market changes and not build sustainable models to support a free press we will be left with a world that denies the Founding Fathers. Consider this from the Brookings Institute:

"The Founding Fathers knew this. They believed that their experiment in self-governance would require active participation by an informed public, which could only be possible if people had unfettered access to information. James Madison, author of the First Amendment guaranteeing freedom of speech and of the press, summarized the proposition succinctly: “The advancement and diffusion of knowledge is the only guardian of true liberty.”

Food for thought...Happy 4th of July from all of us at Adomik!

 

*credit to Ben Thomson's Stratechery. He was an early public thinker on the "Free" inflection point.

Topics: programmatic yield management, RTB Yield Management, Programmatic, Digital Publisher

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If you are a programmatic seller looking to:

  • Have a unified understanding of your stack
  • Increase your revenue by up to 30%+
  • Better leverage private marketplaces
  • Maximize your header bidding channel

Reach out to us, we can help. Click below to get in touch. We look forward to hearing from you.

Schedule Your Demo